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Pipemakers book a steady stream of orders despite housing bust

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Looking at the number of water line projects Northwest Pipe Co. has landed so far this year indicates a booming market, but appearances can be deceiving.

The Vancouver, Wash.-based company won two orders amounting to $18.5 million in February, three orders totaling $32 million in June and another $6.2-million order in July. But Brian Dunham, Northwest Pipe's chief executive officer, said he wouldn't necessarily use gushing terms to describe the market, despite the seemingly large size of its orders.

"It's been strong for several years now, with new record highs in terms of market activity for the last three years. It's not significant increases, but small increases," he said, noting that the number of jobs booked by Northwest Pipe fell at the end of 2008 to end the year at a level that was slightly less than what the company booked in 2007. "I think it's going to be up again this year," Dunham added.

Likewise, Texas Pipe Works Inc., Longview, Texas, which manufactures connections for downhole tubulars used in water wells, is seeing work, but not at previous levels. "If I'm remembering correctly, (2007) was a really good year," said Craig Medley, Texas Pipe Works' vice president of sales. "All that was residential work. Then it all started tapering off in 2008."

Most of the well drilling on the East Coast is residential, so the housing market downturn has impacted that market, Medley said. "There's the same scenario in the Midwest, but they also have the agriculture part of the business. Plus, there's been some drought conditions in several states. We've seen a pickup in water well business in the last 60 days."

Medley said he's heard very little about how economic stimulus funding under the American Recovery and Reinvestment Act (ARRA) has impacted water projects. "If there is some stimulus money available for water well projects, that would be the first I'd heard of it," he said. "I've heard that all the red tape involved and paperwork involved was astronomical."

Dunham said Northwest Pipe so far has had only one project funded by the stimulus package. "Everything else is in front of us as well," he said. "But there's a requirement that these projects take place within a year, and I'm not sure what 'take place' means." That's a very short time frame for water projects, which typically have five- to 10-year gestation periods as a result of all the right-of-way and environmental issues that can surround them, Dunham added.

However, the water line business is a good one for Northwest Pipe, he said. "As the U.S. population continues to grow, water is a requirement to support that growth," he said, adding that most of Northwest Pipe's work has been for new water lines.

"They talk about the aging infrastructure underground that is falling apart that has to be replaced," Dunham said, "but so far that's not been a significant impact on our market. That's still ahead of us, too."

Several sources mentioned Berg Steel Pipe Corp., Panama City, Fla., and JSW Steel (USA) Inc. in Baytown, Texas, as players in the water transmission market, but spokesmen at both companies said that while they have done some water projects in the past and still occasionally receive requests to make water lines, they prefer to focus on the energy market.

Several market sources also mentioned Skyline Steel LLC, Parsippany, N.J., as another player in the industry, but the company didn't return calls seeking comment.

One drawback of playing in the water tubulars market is contending with the high cost of transporting tubulars on a tractor-trailer across the country. Because transportation of tubulars more than 100 inches in diameter is so expensive, Northwest Pipe has decided to take the pipe mill to the water line project area. "We just completed building two mills that are designed to be transportable," Dunham said. "Pipe mills have been moved around in the past, but it's a fairly intensive process cutting them apart and putting them back together again. These were designed in a way to make them more containerable and easier to ship."

The mill will make pipe from flat rolled and then coat and/or line the pipe, possibly allowing for fabrication of bends, elbows and other add-on stages downstream.

However, a project has to be large enough to make the move economic, Dunham said. "We're not going to move a mill for a small project, but there are projects in the world large enough that the transportation costs of going from a fixed manufacturing site to a customer site are really large."

While one of the transportable mills is being installed at Northwest Pipe's southern California plant, the other will be used as designed. "One mill will have multiple homes. We'll put it in a location, work through a large project and then move to a new location," he said, declining to say how much the company has spent on the mills or where the second one will be erected first. "It's ready to go. This year. Somewhere."

A tubular manufacturing source said orders from customers are down. "Last fall, it started to slow down," he said. "I think availability of funding came into play. It seems to be projects that are out there are still coming, but there are not as many new ones as there used to be." He attributes the orders that are coming in, in part, to ARRA. "We don't get a lot of information on the projects we're supplying, but that's our guess," he said.

The manufacturing source said he's not sure the water tubular market will ever again see the demand levels reached during the hey-day of the real estate boom, when contractors were throwing up houses and burying water lines beneath them. "This is one of those areas where we should have a growing industry for a long time, with population growth," he said. "But it's not something we can quantify. I'm an optimist, but I don't know if I'd go out that far to say it will boom again.

Maria Guzzo

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